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GST to top collection this year

SECP, SBFC, NDFC, ADB heads to change soon

Aziz confident of economy attaining stability

RECORDER REPORT

KARACHI: Finance Minister Shaukat Aziz said here on Friday that he was confident that good crops, 20 percent increased tax collection and better fiscal policies would stabilise the economy.

Addressing a press conference at the State Bank of Pakistan, along with State Bank Governor, Dr. Ishrat Husain, the minister said that the changes were being brought about at all levels by replacing heads of financial institutions, along with public sector institutions.

"The Security Exchange Commission of Pakistan will have a new Chairman, Khalid Mirza, who is currently working for IFC in Thailand," the finance minister said.

He said that Qaiser Naseem would be the next managing director of Small Business and Finance Corporation. The head of the proposed 'Micro-Credit Bank has also been selected' he said, but did not disclose the name. He said he would take charge within the next 10 days.

The heads of NDFC and ADB would also be changed within a couple of weeks, the minister added.

"Tax collection increased by 20 percent in the first seven months of the current fiscal year. It includes 10.4 percent increase in direct taxes, and 25 percent in indirect taxes," said the minister.

He said sales tax increased by 76 percent, excise duty dropped by five percent, custom duty increased by three percent, exports and imports increased by 8.5 percent and 13 percent, respectively.

He said that GST would be Number One tax in the current year collection.

He emphasised that the agriculture tax would be imposed from the next fiscal year. A committee would finalise the details of the tax next month, he added.

He did not make it clear that whether the government was considering to increase the oil prices. "We are spending additional 100 million dollar on import of oil because of high prices in the international market. We will review the prices in March after OPEC's decision about the prices, which is expected in March. If there is any decline, we are committed to bring down prices at the retail level," said Aziz.

The Advisory Board will hold a two-day meeting on Friday and Saturday (next week), in Islamabad to review the economic situation, especially after the policy speech by the Chief Executive, General Pervez Musharraf. "We will see how much has been implemented from the policies announced by the Chief Executive," the minister said.

He informed the press that negotiations with the Paris Club had almost been completed. "We are negotiating with non-Paris Club for the rescheduling of debt. Talks with China have been completed while negotiations with Saudi Arabia, UAE, Kuwait are continuing. Russian team is in Islamabad and the agreement has been finalised. We are trying to negotiate with Czech Republic for a small debt rescheduling," said the minister.

He said since May 1999, Pakistan has received no aid from the IMF. "A full IMF mission is expected before the beginning of the new fiscal year," he added.

He supported the rightsizing in the public sector and government owned institutions. "Eight institutions, including Pakistan Steel, are causing a loss of 1.4 percent of GDP," he said.

In reply to a question SBP Governor, said that there was no restriction of any kind on foreign direct investment. "We have removed all kinds of restrictions on FDI which is the most important factor in our economy," said the Governor.

About new flows, he said that portfolio investment was highly destabilising, as 300 to 400 million dollars, might leave within a day. "We cannot afford this high level of volatility; so, we have some restrictions on it," he added.

About the low rate of credit to small borrowers, Dr Ishrat said that liquidity increased, compared to the deposit because of several factors. In fact, small credits had been supplied by the institutions like IDBP, SBFC, etc, which are not in good health. The big public sector banks never contributed to the small credits in big numbers, he said.

Another reason for low credit, he said, might be the fear of campaign against the defaulters which prevented borrowers from taking loans.

He said he was not sure that how much credit would be used by the small borrowers the next five months.

Talking about low foreign reserve, Dr Ishrat said that "our reserves are enough only for six-weeks imports." He stressed for its improvement.

The finance minister said that Pakistan needed foreign aid to improve its foreign exchange reserves.